Just how is PoCA confiscation supposed to work?

The UK Supreme Court recently heard 3 days of complex legal submissions about a straightforward confiscation case. Four eminent counsel suggested half a dozen wildly differing figures for the benefit arising from a single mortgage fraud. Obviously the operation of confiscation under Part 2, Proceeds of Crime Act 2002 is neither simple nor straightforward. There is a conspicuous lack of clarity and certainty in the confiscation regime.

The appellant, Mr Waya, contested the finding of the Court of Appeal that he pay £1.11 million – R v Waya [2010] EWCA Crim 412. That was a reduction on the figure originally ordered in the Crown Court of £1.54 million. His counsel suggested the correct figure was nil – or on an alternative basis it might be £0.255 million. Counsel for the prosecution contended the Court of Appeal had the correct figure. But counsel for the Home Department proposed a figure of £0.6 million and counsel for the Attorney General put the figure at £1.0 million. Each of these figures was said to be based on applying the same statute law to the undisputed facts of the case.

Mr Waya dishonestly obtained a mortgage advance which he used to purchase a flat. The flat went up in value . . .

The facts are these. Mr Waya dishonestly obtained a mortgage advance which he used to purchase a flat. The flat went up in value. He legitimately obtained a new and larger mortgage, repaying the first mortgage in full. The flat continued to increase in value. Mr Waya was convicted of mortgage fraud (in relation to the original mortgage), or more accurately he was convicted of obtaining a money transfer by deception contrary to s15A Theft Act 1968, and was then subject to confiscation under PoCA 2002. The sole question before the court was the amount of his benefit from the mortgage fraud (referred to as the benefit of his ‘particular criminal conduct’).

There were striking differences of principle in the approach of different counsel to the interpretation of PoCA 2002 as well as some different interpretations of the facts of the case.

The submissions of Mr Waya’s counsel

Mr Waya’s counsel put forward four alternative arguments. Firstly he said that, on careful consideration of the facts, Mr Waya had not obtained anything when the mortgage was advanced since he had never been in control of the monies advanced. He was never in a position to use the monies for whatever he might have wanted (they could only be used towards the purchase cost of the flat).

Secondly, Mr Waya (if he did obtain something) had obtained something of no market value. He had not obtained a gift, he had obtained a loan. The obligation to repay was integral to the money transfer – and the market value of the combination of the monies advanced to him and the repayment obligation was nil. This result flowed from s79(3) PoCA 2002.

The courts should not take a ‘snapshot’ view but instead “the entirety of the transaction” had to be considered

Thirdly the courts should not, Mr Waya’s counsel contended, take a ‘snapshot’ view (considering only what happened when the mortgage was advanced) but instead “the entirety of the transaction” had to be considered. The lender had been repaid in full and had lost nothing as a consequence of Mr Waya’s dishonesty. So, looking at the entirety of the transaction, there was no benefit for the purposes of confiscation.

Fourthly, as a final alternative, the courts should look to the ‘pecuniary advantage’ derived by Mr Waya in accordance with s76(5). He had been assisted in the purchase of the flat which had subsequently increased in value. His counsel had calculated the value of his ‘pecuniary advantage’ to be £255,000.

The House of Lords had taken a wrong turning many years ago when it was said that “subsequent events are to be ignored”

Mr Waya’s counsel conceded that his proposal that the court should look to “the entirety of the transaction” rested on his view that the House of Lords had taken something of a wrong turning many years ago in the confiscation case of R v Smith [2001] UKHL 68 when it was said at para [23] that “subsequent events are to be ignored”. That may be correct where, in the drug trafficking legislation, the benefit for confiscation purposes was to be based on the ‘payment or reward received’ – but it was not the correct approach to confiscation under the Criminal Justice Act 1988 or PoCA 2002 provisions where benefit was based on what had been ‘obtained as a result of or in connection with the criminal conduct’.

In consequence, it was contended, very many confiscation cases had been wrongly decided by courts at every level in England & Wales since that time.

The submissions of other counsel

Counsel for the prosecution, on the other hand, contended that the Court of Appeal had come to the correct conclusion in respect of Mr Waya’s confiscation. Furthermore, with a very few exceptions, appeal courts had come to correct conclusions in confiscation cases over the years. It was right to ignore subsequent events. In particular the Court of Appeal had correctly decided in the case of CPS v Rose [2008] EWCA Crim 239 that s79(3) should not have the effect of causing the victim’s interest in any property to reduce the defendant’s benefit in confiscation in connection with his criminal conduct – although there are no words to that effect in the statute.

A defendant should not be entitled to rely on his own crime to limit the benefit of that crime for the purposes of confiscation

Counsel for the Home Department and for the Attorney General suggested a slightly different principle to be drawn from the Rose case. This was that a defendant should not be entitled to rely on his own crime to limit the benefit of that crime for the purposes of confiscation. In consequence, it was contended a thief or handler of stolen goods was to be treated as if he had obtained the value of good title to the stolen goods and where, as a result of criminal conduct, property had been obtained jointly by offenders then each of them was to be treated as obtaining the value of the whole of the property jointly obtained. Again, of course, there are no words to that effect in the statute.

It will probably be 2 or 3 months before we will learn the Supreme Court’s decision in this case. [UPDATE – Judgment in the Waya case was handed down on 14 November 2012, see below.] But whatever that decision is I suggest that there will continue to be serious difficulties with the practical application of the confiscation regime – not least because this case did not touch at all on the consequences of the statutory ‘criminal lifestyle’ assumptions.

David

P.S. I have prepared a summary of the detailed legal submissions by counsel to the UK Supreme Court in R v Waya which is on Criminal Solicitor Dot Net HERE.

I cannot help feeling that Mr Waya’s counsel may have been ill-advised to ask the Court to look at the entirety of the situation. Surely it’s relevant to ask whether Mr Waya would have been able to obtain a mortgage at the later date (ie when he remortgaged), if he had not first had the benefit of the increase in value of the flat after the first (fraudulent) mortgage.

Maybe the justices will come back with a verdict along the lines of “Now you mention it, we think the benefit was the increase in the value between the original purchase and some later date, such as the date he was charged (assuming he did not sell it).”

And the value of the flat at that date would not be market value less mortgage, because he benefited from being able to raise more cash at the remortgage, which he used for – well – something else. And the benefit of that something else would have to be taken into account.